Journal Entry For Prepaid Expenses/ Example for prepaid expense

Journal Entry for Prepaid Expense

Prepaid Expense (asset) a/c     dr            10000
  To Party/Vendor a/c                                         10000
(Booing prepaid expense in books)

Party/Vendor a/c                     dr            10000
  To bank a/c                                                      10000
(being payment made to vendor)

Expense a/c                             dr            1000
  To Prepaid Exp a/c                                          1000
(being amortizing prepaid exp on monthly/quarterly basis etc)

The above example shows that while accounting the expense entry the balance in prepaid expense will reduce by 1000 and the balance will be only 9000. At the end of the 10th month there will be no balance in the prepaid account and everything will be accounted as expenses.

What is ERP ( Enterprise Resource Planning)

ERP is a business process management software that allows the the organisation to use set of integrated applications to manage the business and automate back office functions.

Different Methods of Capital Budgeting

When there are various Investment proposals, Capital budgeting helps us to find out the BEST Investment proposal using various techniques. They are,

1. Payback period.
2. Discounting payback period.
3.Accounting Rate of Return (ARR).
4.Net present Value (NPV).
5.Internal Rate of Return (IRR).

What is Capital Budgeting ?

When there are various Investment proposals, Capital budgeting helps us to find out the BEST Investment proposal using various techniques. They are,

1. Payback period.
2. Discounting payback period.
3.Accounting Rate of Return (ARR).
4.Net present Value (NPV).
5.Internal Rate of Return (IRR).

What is Cash flow statement

Cash flow statement is a financial statement which shows cash inflows and outflows resulting from Operating , Investing and Financial activities.

What is Letter of Credit-Meaning-Explanation

It is the bank’s guarantee that the buyer will make his payment to the seller. The bank will have to make the payment if the buyer defaults to pay. It is a deal between buyer’s bank and the seller’s bank.

What is Appreciation of Asset

Appreciation is increase in value of asset. In current economic condition the value of land and buildings are going up high so in accounting term it is known as Appreciation. This is opposite of Depreciation. This term can be used in any assets like stock, real estate etc.